Settle. Small word, big consequences. Do you settle or not?
Sometimes it seems as if the answer is "whatever you do will be wrong
but you must act at once!" The question is not one that can be anwered
from outside of your organization with much care given to the
consequences. Workers' Compensation claims have defined benefits. In
most jurisdictions, those, benefits include medical treatment, lost
wages and impairment. If the benefits are defined, why bother to
settle? The answer, quite simply is that while you know WHAT you have
to cover, you don't know how LONG you have to cover a specific benefit
and, as a result, don't have an accurate picture of how much it is going
to cost you. Some employers take the position that to settle a claim
is to encourage more claims and possibly to even participate in fraud
for those claims that don't seem to have a solid basis in fact. Other
employers consider that a comp claim is going to cost them money either
in paying it, defending against it or in settling it and that the most
prudent course of action is to make the decision in light of the
circumstances and to eschew any hard and fast rules. As with most
decisions in life, the only difference between the BOLD choice and the
FOOLISH one is the outcome. If it goes your way, the decision was
correct and your choice was bold. If it goes the other way, well....
So then, what are the implications of a settlement policy? Let's
consider first the employer that says "no way, no how, no matter how
little or how much."
NO SETTLEMENT AT ALL
There
are some instances in which a no settlement policy makes sense, at least
for a period of time. If your experience has convinced you that
settlements have produced negative consequences for your business or
will likely lead to that in the future, then your instructions to your
attorney is to decline any and all settlement demands from opposing
parties. Most often the response will be dumbfounded silence followed
by probing questions designed to test how seriously that policy will be
applied. You should be prepared to give your reasons to demonstrate
that yes, you really mean no settlement. For example, if your business
is in a small community in which your employees are all friends and
neighbors, your conclusion is that settling one case led to ever
increasing demands for settlement and that with everyone thinking that
their claim is worth more than the previous one, even entertaining
demands became untenable. Another example might be with a business that
was in growth mode and that this business had previously settled claims
with a resignation from the injured worker only to see that same
injured worker show up at a facility which was being acquired. The
limitations on your ability to ask about prior medical conditions and
concerns for the possibility of ADA violations, led your company to
conclude that settlement is not worth the risk. Yet another example
might be cases in which you will consider nominal settlements but no
settlements if an Medicare Set Aside entanglements might be required.
In other words, just saying no invites questions and challenges. But,
saying no with a convincing rationale as to why you've made that call
provides the attorney with the idea that you've thought this through and
that he should not waste his time or yours in pursuing settlement any
further.
The problem with the no settlement policy, is
that it takes a long time for word to spread amongst the Plaintiff's
bar that you mean business. After that word has spread sufficiently,
your reputation will become well enough known that the minor claims
sometimes are not pursued as vigorously as before the policy. In the
meantime, your legal expense budget has gone up as you've defended the
claims that needed defending, taken your lumps where indicated (we all
make mistakes so it is unrealistic to suspect that a wrong decision on
compensability, a late check check or a failure to timely pay a medical
bill isn't going to happen). While that process is going on, those
claims that are legitimate, that are severe remain on your books and the
reserves affect your experience modification rating such that
increasing amounts are reserved simply to maintain the claim and not to
dispose of them. In the meantime, the more serious of those claims
become entangled with Social Security Disability, Medicare conditonal
payments and the need to account for medical expense for the compensable
conditions for the remainder of the injured worker's life. Face, it,
while medical treatment from a back injury 1970 is realistically going
to taper off, the formulas for calculating the MSA mean that every time
this person has an exacerbation, an ache from just getting older, the
Center for Medicare Services assumes that it's your's to cover.
I
do not mean to suggest that the no settlement policy is always a bad
idea, only that while it saves money on one end of the claim, it also
costs money on the other end. For example, if you are presented with a
compensable claim in which an employee is returned to modified duty,
you will need to recognize the ongoing obligation for income and medical
treatment. If your choice before was to pay, to settle or to return
the employee to work, your choice now is necessarily restricted to pay
or return the employee to work. Of the two, returning the employee to
modified duty work requires the most patience out of you, your staff
and your organization. If the restrictions are such that you cannot
accomodate, or just that this accomodation per the ADA is going to make
the next accomodation request more difficult, then the decision NOT to
settle may have the effect of rendering the already serious claim a
permanent total one.
SETTLE EVERYTHING
As
with the "absolutely not" policy listed above, the decision to settle
anything and everything also has consequences. While the no settlement
policy may take time to wind its way through the grapevine, the settle
everything mantra can spread faster than wildfire. If your decision is
to settle in lieu of bringing any injured worker back to work at
modified duty, beware that you MAY be both establishing a baseline for
claim value and providing a road map for someone to present a
questionable claim while they are on the way out the door to another
employer. If that employee knows that all he must do is to get
restrictions imposed and that you will throw 10-20k at him to get him to
go away, you will have others lining up to take that same well-trodden
path.
CASE BY CASE ASSESSMENT
Moderation
in all things may be a good thing. In this discussion, moderation
simply means that you will not immediately move to settle, you will not
immediately refuse to consider it. Still, you may wish to establish
certain standards for what will and will not be settled. That decision
should be communicated to your injured workers and their attorneys early
and often. For example, the current bane of my existence is complying
with the Medicare Secondary Payor act and assuring that in any case in
which the employee is on medicare or likely to be on medicare, that we
take Medicare's interests into account and not attempt to transfer that
private risk to the taxpayer. If you decide that the process and
pricetag for MSA's is simply too much, your decision not to settle any
cases in which an MSA is necessary should be communicated as a warning
to injured workers and their attorneys that they should not apply for
social security disability benefits as to do so means that the claim
will be removed from the settlement consideration list. Again, this
requires patience, courage and tenacity on your part because that claim
now requires extra attention. That attention may be in the form of
managing the medical care, returning the employee to work with your
company, or paying for vocational assistance to secure suitable
employment elsewhere.
The bottom line is that comp
claims cost money. Your decisions on settlement should be made in
consideration of immediate and long term costs. Saving money in the
short run on settlement may cost money in the long run on medical or
income. You should be aware not only of the direct costs but also the
indirect costs associated with your claims. There is no way to compute
with mathematical certainty what the least expensive option may be. You
should decide though with a full understanding of all of the numbers
and include in that calculation what the impact on your business may be
from each option available to you.
"Skedsvold & Whitesvold
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